* U.S. Treasuries yields lowest in 3 months as tapering seen
delayed
* Wall St down after four record sessions on S&P 500 on weak
results
* China short-term rates spike boosts demand for dollar,
yen, Swiss franc
By Angela Moon
NEW YORK, Oct 23 (Reuters) - U.S. Treasuries yields fell to
the lowest in three months on Wednesday on reinforced
expectations that the Federal Reserve is unlikely to reduce its
stimulus efforts in the near term, while global equity markets
ended their recent winning streak.
On Wall Street, the S&P 500 was down after a four-day streak
of record highs as shares of Caterpillar and a number of
chipmakers tumbled on weaker-than-expected results.
European shares snapped a nine-day winning streak, hit by
plans for a tougher stress test for euro zone banks, as well as
weak earnings numbers and forecast downgrades in other sectors.
The FTSEurofirst 300 index lost 0.6 percent.
Global equity markets weakened as China's primary short-term
money rates rose on concerns the People's Bank of China may
tighten its cash supply to address inflation risks, which could
hurt growth in the world's second-largest economy. Shanghai
shares fell 1.3 percent.
In the U.S. Treasuries market, the focus was largely
centered on next week's Federal Reserve policy meeting, where
the U.S. central bank is expected to keep its $85 billion a
month bond purchase program unchanged.
"The Fed is kind of handcuffed from doing any tapering; the
consensus is pushing it out to March. The weak (jobs) number
supports it," said Sean Murphy, a Treasuries trader at Societe
Generale in New York.
A Reuters poll conducted on Tuesday showed 9 of 15 U.S.
primary dealers see the Fed starting to reduce bond purchases in
March, with many of them blaming Washington's fiscal impasse for
a "significant" impact on the Fed's timing.
The benchmark 10-year U.S. Treasury note was up
11/32, the yield at 2.4709 percent.
TOUGHER BANK HEALTH TESTS
The STOXX Europe 600 Banks index dropped 2.1 percent for its
weakest day in two months after the European Central
Bank said it would review the quality of a broader-than-expected
range of assets held by top regional lenders next year. That may
result in them having to raise fresh capital.
The Spanish IBEX and Italian FTSE MIB
recorded their worst sessions since August.
On Wall Street, Caterpillar Inc was one of the
biggest decliners on the S&P, slumping 6 percent to $83.83 after
the heavy-equipment machinery maker cut its full-year outlook
for a third time.
The Dow Jones industrial average was down 63.61
points, or 0.41 percent, at 15,404.05. The Standard & Poor's 500
Index was down 8.49 points, or 0.48 percent, at 1,746.18.
The Nasdaq Composite Index was down 25.25 points, or
0.64 percent, at 3,904.32.
MSCI's world equity index, which tracks
shares in 45 countries, fell 0.6 percent.
CHINA CONCERNS
China's primary short-term money rates rose in
a delayed reaction to signals from regulators that they are
considering tightening liquidity to tamp rising inflationary
pressure.
A policy adviser to the People's Bank of China told Reuters
on Tuesday that the authority may tighten cash conditions in the
financial system to address inflation risks.
The benchmark seven-day repo contract, which has
been on a steady slide since Oct. 9, rose steeply, with quotes
as high as 4.55 percent, up more than a full percentage point
from the previous final closing quote.
Concerns about soft U.S. jobs data for September, which
appeared to rule out a cut in U.S monetary stimulus before next
year and caused a plunge in the dollar, took a back seat as
Chinese money market rates climbed to levels not seen since
July.
Rising liquidity needs for Chinese corporate tax payment
deadlines and worries about bad banking debt appeared partly
responsible for the jump in short-term rates, analysts said.
The rate spike was short-lived but caused a market panic
nevertheless, causing a scramble for safe-haven currencies.
"The weight of a weak U.S. non-farm (payroll data released
on Tuesday) is surpassed by rising risk aversion on concerns
over China's money market. Profit-taking takes hold," said
Camilla Sutton, chief currency strategist at Scotiabank in
Toronto.
The yen was in demand, pushing the dollar down 0.8 percent
at 97.31 yen and the euro 0.9 percent weaker at 134.06
yen. The Swiss franc rose as the dollar and euro both
slipped 0.3 percent to 0.8924 and 1.2296 francs
, respectively.
In commodities trading, U.S. crude fell toward $96 a barrel
to its lowest since July, outpacing a smaller drop in Brent
futures, pressured by ample supplies and a further inventory
build-up in the United States, the world's top consumer.
U.S. crude fell $1.00 to $97.30 and earlier reached
$96.16, its lowest since July 1. Brent crude fell $1.55
to $108.42 a barrel after hitting a session high of $110.06.